Innovation, building enthusiasm, and solar as a service: an interview with Sungevity Founder Danny Kennedy

Danny Kennedy

Danny Kennedy is an activist, cleantech entrepreneur and opinion leader on global environmental issues. Kennedy’s accomplishments in the cleantech sector have earned him numerous awards, including “Innovator of the Year,” from the PBS program "Planet Forward" for pioneering an easy-to-access and affordable residential solar solution. The process, which Kennedy refers to as “Sunshine online,” harnesses the power of the Internet by using satellite images and aerial photography to assess rooftops remotely and deliver an online solar quote (or iQuote) within 24 hours.

Kennedy founded residential solar power company Sungevity in 2007. He is president of the company, serves on its board of directors and oversees government relations and community engagement programs.

Solar Server: Can you talk a little about Sungevity's business model, and how solar leasing works?

Danny Kennedy: Sungevity innovates in two ways in the solar industry, one is the solar lease, that we can come back to, and the other is that we take care of most of the business processes in a very efficient manner either online, or over the phone. We developed game-changing software technology that allows us to sell solar without doing the antiquated, time-consuming and labor intensive, conventional site visit quote for a customer. We instead harness the power of the Internet and use air and satellite imagery to design an accurate installation for a customer’s rooftop without physically going to the site.

And then we use that customized design along with information on the customer’s average utility usage, to present the customer with an interactive quote, or what we call a Sungevity iQuote.

Bottom line, we have the most efficient and scalable model in the industry - we've taken the truck rolls out of it, that time in traffic just going to see a potential customer who probably in the conventional industry converts about 10% to being a sold customer. We don't have to make all of those in-person site visits. Instead we are sitting in Oakland, California with a couple of hundred staff serving eight states, and we're about to go into a new one. Our Remote Solar Designers also design systems for homes in The Netherlands for our sister company, Zonline, and for homes in Australia for Sungevity Australia.

And we are able to do that using our Sunshine Online platform. Key to that, to make clear how we work, we have a network of preferred installers across the country, who we manage to do the installation with the customer.

And that's our secret sauce, if you will – that combination of Sunshine Online platform, solar lease, and fantastic, quality-assured subcontractor network – that provides for the most efficient model in the residential sector.

Solar Server: That's quite a novel innovation. Now, in terms of solar leasing, how does that work?

Danny Kennedy: So, solar leasing is the other variant of third-party owned solar systems than the PPA, the power purchase agreement model. We own the systems that are on the customer's roofs, we lease them to those customers, and they pay us for the electricity produced but basically at a flat rate per month, and with them, again because of our unique Online Sunshine platform they are able to go solar with us, and do the electronic signature for the lease contract and the credit check and all that stuff through the Internet.

We’ve streamlined what used to be a very paper-heavy and complicated process for homeowners., But as far as the value proposition goes, it's pretty outstanding. In most cases we sell the lease as a no-money down proposition, and for most customers they will save money in the first month. And pretty much for all customers they will save money over the total of the lease.

So, it’s hard to beat. Customers will still get a bill from their local utility for any electricity they use that is not generated by their solar system and they pay us a flat fee for their solar lease, and the total of those two bills for 80+% of our customers, is less than what they used to pay before going solar with us. And that's just for the first month!

For all our customers, as time goes by, the electricity prices from the grid will rise, and they will have locked in a safety net and reduced their cost of electricity over time. So all of them are likely to save thousands of dollars over the life of the lease.

Solar Server: To go into the broader picture, using all of these models - solar leasing, PPA, how is solar as a service affecting U.S. residential and commercial PV markets?

Danny Kennedy: It's really changing the game. We were kind of a cottage industry with a clunky set of processes, and now we are really a service business focused on streamlining those processes and making them as simple and painless as possible for people, The success and growth of our business proves that we’re accomplishing just that.

Now my view, and this is from 20 years, working in and around the space, is that the barriers for uptake to solar are upfront cost, hassle and trust.

And to just go through those things: The upfront cost is obvious. Other energy systems don't require the end-user to buy them up front. We don't pay for a chunk of the coal-fired power plant somewhere on the outskirts of town, to get coal electricity. We instead have a contract with a service provider to provide that to us and we pay them after the fact on a monthly basis, and that's kind of what we are doing with the solar power plant on your roof.

We're allowing you instead of buying, up front, 25 years worth of electricity, we're saying, we'll capitalize it, you pay us back.

That upfront cost barrier is huge. And that's combined with the reduction in actual costs, so it's not just the up-front nature of it. It's the fact that we've been able to reduce the cost of systems, so it has hugely helped us, because that means that we are now cheaper, per kWh, than a lot of electricity bills that people are receiving these days.

And the second is hassle. And this is just suggesting the reality of the change that it is hard, and probably the most successful ruse of the utility industry so far has been to make us unconscious of our electricity and where it comes from and how it works. People don't really get it, don't know what a kWh is, they just sort of get a bill once a month but they don't really understand it so they sort of pay it and resent it but never really challenge it.

And yet asking them to change habits from a lifetime is really hard. So we have to make that as easy as possible, and make the switch as simple as we can.

That's why we took it online and made the business a little more like Expedia or Zappos than a contractor coming up to your house a few times and going on your roof and tramping your tiles and doing the hard sell at the kitchen table. That way antiquated, time consuming approach has such a construction project feel and it makes it more challenging for Middle America to maintain their enthusiasm. If it feels like a big deal and a huge hassle, people will be turned off. Simplifying the process for homeowners is key to mass adoption.

The third thing is that makes it more likely to get mass adoption is trust. The truth is, we are a nascent industry in the U.S. at least, we are still in the hundreds of thousands of units sold, so amongst a population of three hundred million, we have barely touched the sides of the total eventual market. And people still think that it is not ready yet, it is too expensive, the technology doesn't work, it needs batteries, whatever, they don't understand it.

And seeing more people go solar helps other people go solar. So we as a company really try to spread the social phenomenon and make people comfortable with it. We call it solar as a social network. The fact that is, in the cottage industry, you never see one solar system alone on a street.

Likewise, we are trying to feed that phenomenon, peer pride, neighborhood conversations over backyard fences, and make sure that people are bragging about it, and are talking about it, and saying that they are saving money, and doing the right thing, in other fora, and with feeding social networks and getting them to talk about it and chat about it online.

Solar Server: Tell me a little about the process of initiating solar leasing in a new U.S. state or nation. How do different legal structures and other conditions affect solar as a service, and setting up business in a new jurisdiction?

Danny Kennedy: I can tell you a little bit, I can't tell you that much, because it will take too long. It's painful, it's like pulling teeth, and there's a lot of brain damage required to get your head around the different regulatory structures, and the kind of crazy quilt of American bureaucracy. For example, some jurisdictions will allow third-party ownership, some won't. Some states support it with programs and incentives, some don't.

Change doesn’t come easy, it's an element of human nature. The switch to solar makes so much sense, and despite the challenges we face, we are seeing more and more people getting around to that. People say, we aren't selling hardware, we are selling electricity, and here's a new provider of electricity, the solar industry, and they should have the right to finance it however they want, that's the free market, right? And if they can use tax credits or tax equity and monetize those or RECs then they should.

We recently launched Sungevity Australia and we are providing the first-ever pay-as-you-go option to Australian homeowners. This option was highly anticipated and we are the first mover in the market because of our highly efficient Sunshine online model.

We decided,against calling our pay-as-you-go option a PPA. PPA is just such an inelegant way of saying what we mean and the word – power purchase agreement – is not any better.

So we ended up calling it a Roof Juice contract. It just sounds classically Australian. I think it was a nice example of how the particular legal structure there dictated that we had to use a power purchase agreement model instead of a solar lease per se, and we decided to call it a Roof Juice contract,so homeowners in the market could easily relate to it. So far so good.

Solar Future: At the Solar Future Eastern U.S. conference, you talked about the difficulties that the PV industry has had communicating with clients. Can you elaborate on this point, and Sungevity's strategies to overcome this, for our readers?

Danny Kennedy: The solar industry has grown up quickly and we starting to become real players on the global energy scene.

We do however need to work out how to market ourselves better, not talk so much about our features, but rather our benefits, what we bring to people. Those benefits may be rationale things like cold hard cash - the fact that we are saving people money - but they might also be kind of emotional resonances, around creating a legacy that people can be proud of.

And whether that's the environmental benefit of carbon reduction, or whether that's the energy independence direction that many Americans want to go in, we find that both veins run deep in this society. We give them tools, and help them have that conversation and talk build the enthusiasm.

Because ultimately enthusiasm is the world. You look at any brand in the electronics industry, and the way that they grow their market share can be tied to their ability to boil things down to a simple elegant solution that consumers can understand. We need to do more of that. Solar is really so simple - electricity free from the sky straight to the point of use. What's better than that?

Solar Server: Anything else about Sungevity, solar as a service and the transformation of these markets that you would like to share with our readers?

Danny Kennedy: It's a really exciting time to be in the solar industry, because the cost of goods has plummeted to the point where we are really, very competitive.

What matters is what the price per kWh is on your bill, and for most consumers, solar can now provide substantial savings. And so it's our challenge to now work out how to get that incredible, low-cost, no fuel, no pollution product out there to the masses, to replace the dirty electricity providers who currently supply our electricity. It's really all about thinking of it as a service - solar as a service.